The Daily Start-Up: Twitter This And Twitter That

This morning’s roundup of the latest venture capital news and analysis across the Web:

Art by Mike Lucas

Twitter This And Twitter That – You may be all Twittered out after yesterday’s news that the Web messaging company had raised $100 million. Many of my friends still don’t understand what Twitter is, and frankly, they’re quite sick of hearing “Twitter this and Twitter that.” But this is only the beginning. With that much funding behind it, Twitter isn’t going away anytime soon. It’s not clear yet exactly why an Internet company in an era of cheap Web technology needs this much funding, but you can bet one thing: Twitter can now build an impressive sales force capable of bringing in top advertisers, who will have confidence that the company is here to stick around. And they’ll be able to build a marketing team to keep the Twitter name in your face. It also has the money to pick off young start-ups with talented engineers or key technology that can plug into Twitter. Besides wondering how Twitter will make money (see here on its latest plans), we’re interested in figuring out how the investors will profit. At a $1 billion valuation, the company would need to sell for at least three times that amount for its latest investors to make a decent return….or 5x to 10x that amount to make an excellent, venture-type return. That would suggest they’re building Twitter for the long-haul. We can mock this valuation-on-paper all we want – as start-up founder Jason Fried has done – but it is the price that will determine the venture firms’ return on investment. Stay tuned, more to come.

VC Delusions - Limited partners in venture funds might want to pay attention: A new report coming out of Pepperdine University concludes that venture capitalists’ expectations for investment returns differ wildly from actual results, according to Forbes. The report, authored by John Paglia, an associate professor of finance at Pepperdine, found that VCs surveyed expected median investment returns of about 42%, but the implied rate of returns of these investors’ last funds were just 27%. The data, which come from 185 venture firms surveyed in March and April, “raise troubling questions about just how realistic Silicon Valley’s moneymen are about their ability to make profits in the current, depressed economy–and may help explain why so many mediocre venture firms are still hanging around,” Forbes writes.

Not So Hot ‘Lanta – Atlanta excels at incubating high-tech businesses, but it doesn’t know how to keep them there, concludes a new study (opens PDF document) by professors at Georgia Tech. “Instead of building great high-tech companies, Atlanta has become a feeder system for great high-tech companies in other states,” says study author Dan Breznitz, an assistant professor within Georgia Tech’s Ivan Allen College of Liberal Arts. Study findings show that 40% of Atlanta’s high-tech start-up companies leave for other states within three years. California, New York, New Jersey and Florida are common destinations for Georgia-born IT companies.

Reforming Health Care Reform – Also on the report front, venture capital firm Psilos Group has issued a thoughtful white paper detailing its proposals for fixing the health care system. Along with outlining several goals such as reducing health care inflation to less than 3% annually within 10 years and reducing the number of uninsured to less than 2%, the paper urges the administration to slow down – “it will take 10 years to fix this problem” – and shift the focus from “who pays” for reform to “how much” should be paid for health care. Get the paper here (PDF).

Comments (2 of 2)

Twitter isn't a bad social site. I don't like all the rules and new regulations imposed, I am not "free" to Tweet like I used to be. It's 1984 at TWITTER, so I have left the nest so to speak. In my opinion only: Twitter will Twilt away as "yesterday virtual social network" For those who invested all that green stuff, well, its gonna wilt like the leaves here in the Northeast.

Their is a new network on the horizon: It's a secret called MYDATE@8.COM, the concept is super, once the guy gets funding, it will put to bed many of today's dating/mating and social networking sites.

12:40 pm September 25, 2009

Other sites wrote:

I think some companies are learning from all the momentum taking place in this space. You've also got Identi.ca and then Jaiku (from google) and there is another one I just got word of launching next year called pinggadget

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